Refinancing is an option and a financial choice that can help homeowners meet a number of goals. These are some of the more common reasons that a homeowner may choose to refinance:
- To lower monthly mortgage payments by obtaining a lower interest rate or extending the loan term.
- To reduce interest rate risk by replacing an adjustable-rate or balloon mortgage loan with a fixed-rate loan.
- To reduce the amount of interest paid over the life of the loan and increase build-up of equity by obtaining a loan with a shorter term.
- To take out equity from the home to pay for major expenses or to consolidate existing debt.
When a homeowner refinances their mortgage loan they are replacing their original loan. Therefore they will be faced with many decisions including but not limited to: which lender to use, which loan type is best, what rate and term is optimal, and what fees are reasonable. Unfortunately, without a clear understanding of the refinancing process a borrower may inadvertently jeopardize their home or finances.
Understanding how and when to effectively utilize the option to refinance is an essential post-purchase education topic. One way that NeighborWorks is assisting non-profit organizations with providing this education is by making available a new national curriculum. Understanding Your Options: Mortgage Refinance and Home-Equity Loans serves as a base from which educators and counselors can tailor the content to address specific regional markets and their unique conditions. Providing this information and education is vital as it supports successful long-term ownership.
In addition to the NeighborWorks curriculum above, the following Refinancing section contains an array of helpful information and resources. This information is offered to assist educators and counselors as well as consumers wishing to make informed decisions about mortgage loan refinancing.
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